Chapter 5: Project Scope Management

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Learning Objectives
Understand the elements that make good project scope management important Describe the strategic planning process, apply different project selection methods, such as a net present value analysis, a weighted scoring model, and a balanced scorecard, and understand the importance of creating a project charter Explain the scope planning process and contents of a scope statement
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Learning Objectives
Discuss the scope definition process and construct a work breakdown structure using the analogy, top-down, bottom-up, and mind mapping approaches Understand the importance of scope verification and scope change control to avoid scope creep on information technology projects Describe how software can assist in project scope management
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What is Project Scope Management?

Scope refers to all the work involved in creating the products of the project and the processes used to create them. It defines what is or is not to be done Deliverables are products produced as part of a project, such as hardware or software, planning documents, or meeting minutes The project team and stakeholders must have the same understanding of what products will be produced as a result of a project and how theyll be produced
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Project Scope Management Processes

Initiation: beginning a project or continuing to the next phase Scope planning: developing documents to provide the basis for future project decisions Scope definition: subdividing the major project deliverables into smaller, more manageable components Scope verification: formalizing acceptance of the project scope Scope change control: controlling changes to project scope
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Project Initiation: Strategic Planning and Project Selection

The first step in initiating projects is to look at the big picture or strategic plan of an organization Strategic planning involves determining longterm business objectives IT projects should support strategic and financial business objectives

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Table 5-1. Why Firms Invest in Information Technology

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Identifying Potential Projects

Many organizations follow a planning process for selecting IT projects First develop an IT strategic plan based on the organizations overall strategic plan Then perform a business area analysis Then define potential projects Then select IT projects and assign resources

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Figure 5-1. Information Technology Planning Process

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Methods for Selecting Projects

There are usually more projects than available time and resources to implement them It is important to follow a logical process for selecting IT projects to work on Methods include:
focusing on broad needs categorizing projects performing financial analyses using a weighted scoring model implementing a balanced scorecard
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Focusing on Broad Organizational Needs

It is often difficult to provide strong justification for many IT projects, but everyone agrees they have a high value It is better to measure gold roughly than to count pennies precisely Three important criteria for projects:
There is a need for the project There are funds available Theres a strong will to make the project succeed
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Categorizing IT Projects
One categorization is whether the project addresses
a problem an opportunity a directive

Another categorization is how long it will take to do and when it is needed Another is the overall priority of the project
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Financial Analysis of Projects

Financial considerations are often an important consideration in selecting projects Three primary methods for determining the projected financial value of projects:
Net present value (NPV) analysis Return on investment (ROI) Payback analysis

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Net Present Value Analysis

Net present value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time Projects with a positive NPV should be considered if financial value is a key criterion The higher the NPV, the better

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Net Present Value Example

Note that totals are equal, but NPVs are not.

Uses Excels npv function

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JWD Consulting NPV Example

Multiply by the discount rate each year, then take cum. benefits costs to get NPV

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NPV Calculations
Determine estimated costs and benefits for the life of the project and the products it produces Determine the discount rate Calculate the NPV Notes: Some organizations consider the investment year as year 0, while others start in year 1. Some people enter costs as negative numbers, while others do not.

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Return on Investment
Return on investment (ROI) is calculated by subtracting the project costs from the benefits and then dividing by the costs
ROI = (total discounted benefits - total discounted costs) / discounted costs

The higher the ROI, the better Many organizations have a required rate of return or minimum acceptable rate of return on an investment Internal rate of return (IRR) can by calculated by setting the NPV to zero
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Payback Analysis
Another important financial consideration is payback analysis The payback period is the amount of time it will take to recoup, in the form of net cash inflows, the net dollars invested in a project Payback occurs when the cumulative discounted benefits and costs are greater than zero Many organizations want IT projects to have a fairly short payback period
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Charting the Payback Period

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Weighted Scoring Model

A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria
First identify criteria important to the project selection process Then assign weights (percentages) to each criterion so they add up to 100% Then assign scores to each criterion for each project Multiply the scores by the weights and get the total weighted scores

The higher the weighted score, the better See What Went Right? for a description of how a mortgage finance agency uses a weighted scoring model for IT projects
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Figure 5-5. Sample Weighted Scoring Model for Project Selection

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Implementing a Balanced Scorecard

Drs. Robert Kaplan and David Norton developed this approach to help select and manage projects that align with business strategy A balanced scorecard converts an organizations value drivers, such as customer service, innovation, operational efficiency, and financial performance to a series of defined metrics See www.balancedscorecard.org for more information
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Project Charters
After deciding what project to work on, it is important to formalize projects A project charter is a document that formally recognizes the existence of a project and provides direction on the projects objectives and management Key project stakeholders should sign a project charter to acknowledge agreement on the need and intent of the project
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Sample Project Charter

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Sample Project Charter

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Scope Planning and the Scope Statement

A scope statement is a document used to develop and confirm a common understanding of the project scope. It should include
a project justification a brief description of the projects products a summary of all project deliverables a statement of what determines project success

See the example scope statement in Chapter 3, pages 83-85

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Scope Planning and the Work Breakdown Structure

After completing scope planning, the next step is to further define the work by breaking it into manageable pieces Good scope definition
helps improve the accuracy of time, cost, and resource estimates defines a baseline for performance measurement and project control aids in communicating clear work responsibilities
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The Work Breakdown Structure

A work breakdown structure (WBS) is a deliverable-oriented grouping of the work involved in a project that defines the total scope of the project It is a foundation document in project management because it provides the basis for planning and managing project schedules, costs, and changes

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Sample Intranet WBS Organized by Product

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Sample Intranet WBS Organized by Phase

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Table 5-3. Intranet WBS in Tabular Form

1.0 Concept 1.1 Evaluate current systems 1.2 Define Requirements 1.2.1 Define user requirements 1.2.2 Define content requirements 1.2.3 Define system requirements 1.2.4 Define server owner requirements 1.3 Define specific functionality 1.4 Define risks and risk management approach 1.5 Develop project plan 1.6 Brief Web development team 2.0 Web Site Design 3.0 Web Site Development 4.0 Roll Out 5.0 Support
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Figure 5-8. Intranet WBS and Gantt Chart in Project 2000

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Figure 5-9. Intranet WBS and Gantt Chart Organized by Project Management Process Groups

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Table 5-4: Executing Tasks for JWD Consultings WBS

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Approaches to Developing WBSs

Using guidelines: Some organizations provide guidelines for preparing WBSs The analogy approach: Review WBSs of similar projects and tailor to your project The top-down approach: Start with the largest items of the project and break them down The bottom-up approach: Start with the detailed tasks and roll them up Mind-mapping approach: Write down tasks in a non-linear format and then create the WBS structure
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Sample Mind-Mapping Approach

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Basic Principles for Creating WBSs*

1. A unit of work should appear at only one place in the WBS. 2. The work content of a WBS item is the sum of the WBS items below it. 3. A WBS item is the responsibility of only one individual, even though many people may be working on it. 4. The WBS must be consistent with the way in which work is actually going to be performed; it should serve the project team first and other purposes only if practical. 5. Project team members should be involved in developing the WBS to ensure consistency and buy-in. 6. Each WBS item must be documented to ensure accurate understanding of the scope of work included and not included in that item. 7. The WBS must be a flexible tool to accommodate inevitable changes while properly maintaining control of the work content in the project according to the scope statement.
*Cleland, David I. Project Management: Strategic Design and Implementation, 1994

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Scope Verification and Scope Change Control

It is very difficult to create a good scope statement and WBS for a project It is even more difficult to verify project scope and minimize scope changes Many IT projects suffer from scope creep and poor scope verification
FoxMeyer Drug filed for bankruptcy after scope creep on a robotic warehouse Engineers at Grumman called a system Naziware and refused to use it 21st Century Insurance Group wasted a lot of time and money on a project that could have used off-the-shelf components
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Factors Causing IT Project Problems

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Suggestions for Improving User Input

Develop a good project selection process and insist that sponsors are from the user organization Have users on the project team in important roles Have regular meetings Deliver something to users and sponsors on a regular basis Co-locate users with developers
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Suggestions for Reducing Incomplete and Changing Requirements

Develop and follow a requirements management process Use techniques like prototyping, use case modeling, and JAD to get more user involvement Put requirements in writing and keep them current Provide adequate testing and conduct testing throughout the project life cycle Review changes from a systems perspective Emphasize completion dates to help focus on whats most important Allocate resources specifically for handling change requests/enhancements
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Using Software to Assist in Project Scope Management

Word-processing software helps create several scoperelated documents Spreadsheets help to perform financial calculations, create weighted scoring models, and develop charts and graphs Communication software like e-mail and the Web help clarify and communicate scope information Project management software helps in creating a WBS, the basis for tasks on a Gantt chart Specialized software is available for applying the balanced scorecard, creating mind maps, managing requirements, and so on
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